Long Term Loans vs Payday Loans
There are advantages and disadvantages to both long-term and payday loans, and most of it depends on the needs of individual borrowers. Both can provide access to financial resources that are needed, but each one has their own niche and purpose.
Making sure that you know which option will work in your particular situation can save tons of money in interest and fees. The difference between long-term loans and payday loans is how the money will be used and what the time frame is in terms of repayment.
Long-term loans are meant to be paid off in small amounts over periods of time. This can range from a few months to over 20, 30 or even 40 years. Most of these kinds of loans are processed and funded by traditional banks, financial institutions, and lending agencies; and require a full financial background check. Additionally, long-term loans take longer to apply for, and the process can be involving, time-consuming and complicated.
Examples of long-term loan financing include home mortgage, vehicle loans, and student loans. Designed to provide substantial amounts of money that can be paid back over many years, the interest rate and fees associated with them depend largely on credit score as well as work history, assets and lot of other factors. Better credit score and better job the borrowers have will improve their chances of finding lower interest rates and other favorable terms.
The drawback to long-term loans is that the application process takes a lot of time and requires a lot of documentation and paperwork. Additionally, the need of a guarantor is very common, especially in complex and weak economic climates. However, for those looking for a new car or a beautiful home, getting a long-term loan is the appropriate course of action to take.
Payday loans – usually referred as short-term loans, quick loan or cash advance – are geared for those who need access to fast cash. Designed to be easy to get and quick to pay off, they are the complete opposite of long-term financing. Usually, the application process is much simpler to walk through, and the requirements for getting these loans are much easier. Generally, the only thing that lender look for is a bank account (checking account) and a steady job. Since most of the payday loans are paid off in a matter of days or weeks, they have very high interest rates.
Short-term loans hardly require a credit check or the need of a guarantor. The best of all, application takes only minutes to complete and funds are usually available same day. For this reason, payday loans refer to quick loans. This kind of loans act as powerful and convenient tool for many who would otherwise be out of luck in terms of getting some money for the short term.